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Flat decreases and health care reform
The only fair method for handling the budgets is to have the state legislature set certain percentages of revenue for each category - 25% for K-12, 25% for university, 25% for health, etc., and then have funding levels each year set to that percentage of the receipts from the previous year.
If receipts decrease, then flat decreases should be applied across the board as well. A UC professor might make $110k this year instead of $120k, and a K-12 teacher $70k instead of $80k, but it will avoid the chaos of the current system.
While Bill Gates' ideas were amazingly relevant to myself (I'm also a computer nerd, that studies the California budget out of interest) and things like implementing real accounting practices should absolutely be addressed, he missed the giant elephant in the room: *why* are health care costs expected to double in the next 10 years, and how can we incentivize the system properly to avoid these cost pitfalls?
I also study Medicare and Medicaid, and they are perversely incentivized, with hospitals encouraged to run unnecessary tests, nursing homes are encouraged to ship mildly sick patients off to the hospital (the state pays for nursing homes with medicaid, but the feds pay for medicare - so they get to offload that cost by doubling taxpayer expense), and conduct defensive medicine due to the way malpractice is set up.
Up to half of all moneys spent on Medicare and Medicaid go to fraud, waste, and unnecessary procedures, according to the NY Times. Since health is our biggest budget item, if we can fix it, we'll have a balanced budget, pure and simple. But if we don't fix it, nothing we can do will solve the budget crises.